Wendell Anderson and the Minnesota Miracle

Wendell Anderson — who died on Sunday at 83 — will be remembered for many things, but most prominently for the "Minnesota Miracle" enacted in 1971 during his first term as governor.

The term was coined by the U.S. Advisory Commission on Intergovernmental Relations in the title of its report, which stated: "Minnesota lawmakers and governor may well claim the outstanding fiscal performance award of 1971 for their effort to provide a rational state-local fiscal system. By assuming a dominant role in state-local fiscal policymaking, they intended to reduce the fiscal disparities among school districts, strengthen the general fiscal position of cities and counties and ease the burden of property taxes on homeowners and business firms. In the process, they made Minnesota a model for other states to follow."

High praise, indeed! And well-deserved.

Minnesota's state and local financing system had been spiraling out of control in the 1960s, with rapidly rising property taxes, increased disparities in local educational funding and chaotic fiscal policy. In 1967, the Republican-controlled Legislature (to be exact, it was controlled by the conservative caucus, this being the era before formal partisan identification of legislators) and Republican Gov. Harold LeVander partly reformed the system by the passage of a sales tax and enactment of a state-paid homestead credit for homeowners. But serious design flaws in the 1967 reforms resulted in only temporary relief, and by 1971 the system was again in crisis.

But in 1971, the Legislature and Gov. Anderson instituted a massive and much more lasting reform. In that single year, Minnesota increased the state's share of local public school operating funds from 43 percent to 65 percent; reformed the distribution of school aid to assure much greater equality of funding between richer and poorer school districts; increased and reformed state aid to cities and counties; provided for sharing of 40 percent of future commercial-industrial property tax base across all units of the Twin Cities; partly reformed the system of property tax classification, including removing the obsolete inclusion of business inventories and equipment in the property tax; upgraded the professionalism of property assessors; upgraded the local government fiscal information system, and removed the potential for a Balkanized sales and income tax system by prohibiting counties and cities from levying such taxes without legislative permission.

Was it a miracle?

I was Anderson's tax and school aid adviser and was involved in every stage — from designing the governor's initial plan, testifying to legislative committees, dealing with individual legislators and the press, and taking part in the final negotiations. From my point of view, it certainly looked like a miracle. Keep in mind that while Anderson, a DFLer, had been elected governor by a respectable margin in 1970, both houses of the Legislature remained under Republican control. Republicans had controlled the Legislature for decades during an era of relatively weak governors (Republican and DFL), were accustomed to legislative control of fiscal policy and were not at all inclined to cede policy control to a newly elected young governor (Anderson was 37).

The resulting clash between Anderson's ambitious tax and school finance reform plan and a hostile legislative majority was monumental. Minority DFL legislators, led by Nicholas Coleman in the Senate and Martin Sabo in the House, were largely united behind Anderson's plan. Majority Republicans largely rejected it but were internally divided about how to respond. Senate Republicans led by Stanley Holmquist agreed that a major reform of some sort was needed and passed a reform plan that included a value-added tax and a radical reform of how state revenue was raised, coupled with more modest reforms of school and local government aids. House Republicans, led by Speaker Aubrey Dirlam and Majority Leader Ernest Lindstrom, were inclined to minimal change, rejected both Anderson's and the Senate Republicans' reform plan and passed a modest revision of the status quo. That, in turn, was rejected by the Senate. The regular legislative session ended without passage of any tax and school finance package.

Anderson immediately convened a special session, restating his reform goals. There proceeded months of legislative stalemate, with compromise attempts by various parties producing no agreement, while state government — given the failure to enact essential tax, appropriation and local government aid bills — had to take heroic measures to ensure that minimal state services were provided. Eventually, the Senate Republican majority ceded to the House and passed a tax and school aid package that embodied the House majority's modest changes in the status quo. Anderson promptly vetoed the bill.

There proceeded a war of nerves as both sides waited for the other to break in view of the state's fiscal crisis — a crisis that increased each day in the absence of a comprehensive state government budget. Eventually, responsibility prevailed and all parties (legislative majorities and minorities and the governor's office) met in a protracted session at the governor's residence to hammer out a compromise. It was done, and the result was the Minnesota Miracle.

Who deserves credit?

Well, many people.

Republican Majority Leader Holmquist in the Senate and Republican Speaker Dirlam in the House saw the need for both reform and compromise. Minority leaders Coleman and Sabo superbly generaled the DFL minorities (and, in addition, there was Sabo's role in designing Anderson's reform plan). Tom Kelm, the governor's executive secretary, had an indispensable role in coordinating the actions of the governor's staff with the DFL minorities and with the Republicans.

Anderson, however, deserves the chief credit.

It was he who decided to treat his election as a mandate for a thorough reform of Minnesota state taxes, local property taxes, school aids and local government aids. He never wavered. His instructions to me and to Kelm, and his advice to our DFL legislative allies, were to be willing to accommodate but to never deviate from the fundamental goals of his reform plan. In the end, he prevailed.

John Haynes worked as a gubernatorial adviser on tax and school finance policy in the Anderson and Perpich administrations and as a legislative aide to U.S. Rep. Martin Sabo. He lives in Santa Fe, N.M.